Milk-feed price ratio hasn't been this high since March 2011

For the first time in 31 months, the milk-feed price ratio has settled above 2.0

According to the “Agricultural Prices” report from USDA, released Thursday afternoon, the preliminary ratio for October is 2.09 ― up significantly from 1.88 in September.

It's the highest the ratio has been since March 2011 when it reached 2.14.

The improvement comes as a result of lower feed prices. The corn price used to calculate the ratio fell from $5.40 per bushel in September to $4.49 in October. Soybeans fell in price from $13.30 per bushel to $12.60 over the same time period.

The milk price, meanwhile, rose slightly from $20.10 per hundredweight in September to $20.30 in October.

The milk-feed ratio is a rough measure of dairy profitability. It represents the pounds of 16-percent mixed dairy feed equal in value to 1 pound of whole milk. Therefore, with a 2.09 ratio in October, a dairy producer could buy 2.09 pounds of feed for every 1 pound of milk sold.

Some people question how valid the USDA’s milk-feed ratio is. See this story. But the USDA has been using the same formula for years, comparing the same commodities. Therefore, it can serve as a relative measure for comparing different points in time.